
a)	Concentrations of Credit Risk

Credit Risk Aggregation

We monitor and control the aggregation of credit risk on a consolidated basis by assigning limits on the maximum credit exposure we are willing to assume by single obligors and groups, industry sector, country, region or other inter-dependencies. Our credit exposures are aggregated based on the origin of risk. Limits are based and adjusted on a variety of factors, including the prevailing economic environment and the nature of the underlying credit exposures. Our credit aggregation measurement and reporting process is facilitated by an exposure database, which contains relevant information on counterparties and credit risk; we also license third party databases to provide credit risk assessments.

Credit risk aggregation is also managed through minimizing overlaps in underwriting, financing and investing activities.

The assets that potentially subject us to concentrations of credit risk consist principally of cash and investments, reinsurance recoverable and (re)insurance premiums receivable balances, as described below:

Cash and Investments

In order to mitigate concentration and operational risks related to cash and cash equivalents, we limit the maximum amount of cash that can be deposited with a single counterparty and additionally limit acceptable counterparties based on current rating, outlook and other relevant factors.

Our investment portfolio is managed by external investment managers in accordance with our investment guidelines. We limit credit risk through diversification, issuer exposure limitation graded by ratings and, with respect to custodians, through contractual and other legal remedies. Excluding U.S. government and agency securities, we limit our concentration of credit risk to any single corporate issuer to 2% or less of our fixed maturities portfolio for securities rated A- or above and 1% or less of our fixed maturities portfolio for securities rated below A-. At December 31, 2014, we were in compliance with these limits.

Reinsurance Recoverable Balances

With respect to our reinsurance recoverable balances, we are exposed to the risk of a reinsurer failing to meet its obligations under coverage we have purchased. To mitigate this risk, all reinsurance coverage we purchase is subject to requirements established by our Reinsurance Security Committee. This Committee maintains a list of approved reinsurers, performs credit risk assessments for potential new reinsurers, regularly monitors approved reinsurers with consideration for events which may have a material impact on their creditworthiness, recommends counterparty tolerance levels for different types of ceded business and monitors concentrations of credit risk. The assessment of each reinsurer considers a range of attributes, including a review of financial strength, industry position and other qualitative factors. Generally, the Committee requires that reinsurers who do not meet specified requirements provide collateral.

The three largest balances by reinsurer accounted for 13%, 11% and 11% of total reinsurance recoverable on unpaid and paid losses at December 31, 2014 (2013: 14%, 11% and 11%). Amounts related to our reinsurers with the ten largest balances comprised 77% of December 31, 2014 balance (2013: 77%) and had a weighted average A.M. Best rating of A+ (2013: A+).

Premiums Receivable Balances

The diversity of our client base limits the credit risk associated with our premiums receivable. In addition, for insurance contracts we have contractual rights to cancel coverage for non-payment of premiums and for reinsurance contracts we have contractual rights to offset premiums receivable with corresponding payments for losses and loss expenses.

Brokers and other intermediaries collect premiums from customers to be paid to us. We have policies and standards in place to manage and monitor credit risk from intermediaries with a focus on day-to-day monitoring of the largest positions.

These contractual rights contribute to the mitigation of credit risk, as does our monitoring of aged receivable balances. In light of these mitigating factors, and considering that a significant portion of our premiums receivable are not currently due based on the terms of the underlying contracts, we do not utilize specific credit quality indicators to monitor our premiums receivable balance. At December 31, 2014, we recorded an allowance for estimated uncollectible premiums receivable of $4 million (2013: $3 million). The corresponding bad debts expense charges for 2014, 2013 and 2012 were insignificant.


b)	Brokers

We produce our business through brokers and direct relationships with insurance companies. During 2014, three brokers accounted for 56% (2013: 61%; 2012: 61%) of our total gross premiums written. Aon Corporation accounted for 22% (2013: 26%; 2012: 27%), Marsh, Inc. (including its subsidiary Guy Carpenter and Company) for 22% (2013: 23%; 2012: 22%), and Willis Group Holdings Ltd. for 12% (2013: 12%; 2012: 12%). No other broker and no one insured or reinsured accounted for more than 10% of our gross premiums written in any of the last three years.


c)	Lease Commitments

We lease office space under operating leases which expire at various dates. We renew and enter into new leases in the ordinary course of business, as required. During 2014, total rent expense with respect to these operating leases was $27 million (2013: $29 million; 2012: $29 million).

Future minimum lease payments under our leases are expected to be as follows:




Year ended December 31,

2015	$	27,609
2016	23,074
2017	20,310
2018	17,511
2019	15,937
Later years	36,452
Total future minimum lease payments	$	140,893


d)	Reinsurance Purchase Commitment

We purchase reinsurance coverage for our insurance lines of business. The minimum reinsurance premiums are contractually due in advance on a quarterly basis. Accordingly at December 31, 2014, we have an outstanding reinsurance purchase commitment of $78 million, of which $67 million is due in 2015 while the remaining $11 million is due in 2016. Actual payments under the reinsurance contracts will depend on the underlying subject premium and may exceed the minimum premium.


e)	Legal Proceedings

From time to time, we are subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against us in the ordinary course of insurance or reinsurance operations; estimated amounts payable under such proceedings are included in the reserve for losses and loss expenses in our Consolidated Balance Sheets.

We are not party to any material legal proceedings arising outside the ordinary course of business.


f)	Investments

At December 31, 2014 we have $123 million (2013: $168 million) of unfunded investment commitments related to our investments in hedge and direct-lending funds, which are callable by our investment managers. For further details, see Note 5(b). In addition, we have a $25 million commitment to purchase securities with one of our fixed income managers at December 31, 2014.